Increased global consumption of meat and dairy may help stabilize other commodity prices such as corn and soybeans, which are both used as livestock feed. The iPath Dow Jones AIG-Agriculture ETN (NYSEArca: JJA), whose largest sector allocations are soybeans (25%) and corn (24%), provide an indirect way for investors to capitalize on higher global meat and dairy consumption.
One of the biggest factors affecting meat and dairy exports in 2012 will be a strong dollar. Although meat and dairy exports are projected to increase, they may be hindered by the increasing strength of the dollar, making imports for other countries more expensive. For example, dairy imports to Vietnam from China increased 30% through November due to cheaper prices. Thus, it will be important to watch the value of the dollar in the coming months of the New Year and the reactions of major importers of meat, dairy and other commodities. If exports from other countries such as China or Uruguay, whose meat exports jumped 21% through November continue to increase, then domestic meat and dairy exporters may face a backlash from the stronger dollar.
iPath DJ-AIG Livestock Total Return Sub-Index ETN
August Koster contributed to this article.